Starbucks Faces China Losses Amid Coronavirus Scare

revenue loss

The coronavirus outbreak in China has now begun to impact the profits of Starbucks in one of its biggest markets worldwide, as the coffee chain closes stores and adjusts hours amid virus fears and quarantines.

The virus has caused over 100 deaths in China so far and has over 4,000 confirmed cases as of Tuesday (Jan. 28).

And because of that, Starbucks had to temporarily close about half of its 4,292 stores in China. The closed stores make up about 10 percent of its global revenue, according to Reuters. The financial impact is expected to be temporary, though the company said it doesn't know how long the stores will have to remain closed.

The company was also forced to delay a planned update to its 2020 financial forecast, which was based on strong earnings in the last quarter. Its stock fell 1 percent in extended trading in reaction to the news. They decided not to revise guidance on their 2020 plans until the outbreak has been handled.

Starbucks said it expects the situation to be temporary, however, it won't know the true impact until March — but its long-term, double-digit growth expectations are intact. Starbucks said it is responding to the virus in a "thoughtful and responsible way" in order to work with China as it handles the situation.

Coronavirus originated in the Chinese city of Wuhan and has spread worldwide in January. The virus has impacted other retailers who've had to close stores, and travel to and from the country has been restricted.

Starbucks will continue on course in general, as sales have grown 5 percent in the first quarter.

In China, their main competitor is Luckin Coffee, which overtook them as the biggest coffee retailer last year with 4,500 stores open in the country. Luckin said it would be closing its stores in Wuhan through the Lunar New Year holiday.



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